Good morning
yeah let´s Brexit - or maybe later? or maybe not? maybe have another Referendum? maybe have Johnson as Prime Minister? Maybe he is not brave enough, loosing the next election??? Maybe f.ck the POM´s ( sorry, Andrew!! )? We are VERY angry! I hope we will have them out as quickly as possible, to get over and done with without too much damage to Europe! Absolutely amazing how little prepared English politics are for this outcome. UK banks are getting a hammering...probably assuming, that London property prices will fall by 10-20%, which would play havoc with their property lending books...the English pensioners, who voted for Brexit, might be driven out their houses! Barclays Bank et al down by 25-30% in two days...
Well - I don´t feel sorry for them - but this thing is now starting to reverberate...Italian banks are said to get a big bail-out from the government - Deutsche Bank trading at all time low.....not good!
Uk listed gold producers continue to sky-rocket...Randgold, Centamin etc very very strong..and inflows into gold ETF´s at the strongest in years....
The only good thing about this is, that the increased uncertainty is probably playing into the hands of established parties, pushing back the growing influence of right wing parties in France, Germany etc. Let´s hope so!
Australia should be halfway insulated, for as long as this crisis stays a European crisis - even though the impact on metals demand should be felt to some ( small ) degree. This would certainly be different, if this developes into a real banking crisis ( which I do not believe ). But on the other side, existing Prime Minister Malcolm Turnbull should profit from the Brexit-crisis in Saturday´s elections, which is good for business in my opinion, and Australia could/should actually be a bit of a save heaven these days.
Gold - there got to be a good chance for gold to continue to see inflows. Volatility in financial markets will be with us for some time to come, increasing gold´s allure as a save heaven investment - and also as an alternative to ultra low interest rates. The FED will not be able to move any time soon - most probably not even this year, in my opinion. That should see gold testing 1400$ ...an it´s trading at 1800 A$/oz, which is an all time high in Australian currency! The large producers will have a good time, seeing inflows from generalists, while marginal producers should also do well. In our market Australia, stocks like Newcrest, Evolution will do well - but also something like Perseus could be sought after, having very high costs today and relatively high costs for the next 12 month or so, while having a low market cap per ounce produced, as well as low reserves/market cap. And obviously, new players with projects, which looked difficult to finance, or were marginal at lower gold prices, will greatly benefit. Here I have small companies like Panoramic ( with the triple option: nickel/gold/ cobalt ) in mind, or Crusader with a relatively large, undeveloped gold asset ( Borborema ), and even minnows like Middle Island, which wants to develope an initial 20-25.000oz p.a.only, but has a micro-cap capitalisation of only 10 Mill$ EV.
Highfield - well the elections in Spain have delivered the expected outcome in so far, as the formation of a new government still looks very difficult. BUT the conservative party has surprisingly won more seats, and teh pressure now is definitely on the oppoistion to show, that they are good democrats ahnd have to accept, that a new government can only be formed under the old prime minister. In any case the pressure from provincial governments on the central, Enviromental Ministry is growing to sign the enviromental approval...they are the guys who have to show responsibility on the ground! The good news of the scoping study for the SOP project, which should increase the NPV by at least 500 mill$, has gone largely unnoticed, as the market is clearly waiting for the permit.
Prices of potash have been holding up halfway well in Europe, and are around 300 US$ at the customers facility for SOP. That should roughly equal a price received for Highfield of around 275 US$ / t on average, giving them a 50% margin still.
Furthermore, prices on Indian contracts with Russian producers have been settled now at 227 US$, which is about as recently expected, and should positively impact talks with China, which is yet to settle. Some market analysts had been going for 200 US$ or even below - I think that´s more or less ruled out now. Also positive have been last weeks noises of Belarus, to join forces on the market front again with Uralkali. That would be VERY positive for the potash market - but apparently, Belarus has made similar comments before, without any resulting change to the current fight for market share.
There have been no meaningful micro-news in Australia today.
Have a nice evening
WS
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